Small Business Health Care Tax Credit

Are you a small business owner?  If so, you want to be aware of the information in this post.  As part of the Affordable Care Act, small businesses that meet certain criteria can qualify for a tax credit of up to 35% from 2010 and 2013, and up to 50% tax credit for the tax years of 2014 and 2015.  In order to qualify for the tax credit, small businesses need to meet the following criteria:

– the small business must cover at least 50% of the cost of a single person’s coverage (not family or any other type)
– the small business must have less than 25 full-time equivalent employees (FTE)
– the small business employee’s must have an average wage (not mean) of less than $50,000 per year.  This is calculate by taking total income divided by the total FTE employees.
– and most importantly, for 2014 and beyond, in order to qualify for the tax credit, the small business must purchase small group coverage via the public/government marketplace (aka SHOP – Small Business Health Options Program)

Full Time Equivalent (FTE) is defined as 40 hours a week or 2080 hours a year.

Also, there is a phaseout for FTE and average wage.  If your small company has 10 or less FTE employees and the average wage is less than $25,000 per year, you can maximize your tax credit.  Otherwise, there is a proportional phaseout for both FTE (11 to 25 FTE) and average wage ($25,001 to $50,000 per year).

Here are the sources for my information:

http://www.taxpayeradvocate.irs.gov/calculator/SBHCTC.htm#StartCalculator – this is a calculator you can use to estimate your small business tax credit for 2012.
http://www.irs.gov/pub/irs-pdf/i8941.pdf – instructions on how to fill out form 8941 (Credit for Small Employer Health Insurance Premiums)
http://www.irs.gov/uac/Small-Business-Health-Care-Tax-Credit-for-Small-Employers – summary of the tax credit

I am not an accountant so there is no warranty, implied or otherwise, associated with this information.  Sorry, but I felt the need for a disclaimer.

Come October, there will be more options than ever before.  I am licensed to sell health insurance on the open market.  I have also recently been certified to sell insurance on the public/government marketplace for both individuals and small business (SHOP).  Another disclaimer: I am not eligible to sell Medicaid or Medicare. I will be able to help you weed through your options and find the program that meets your requirements and balance that against the private vs public programs available.

More to come…

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